RealTime IT News

Northpoint Responds to McCain Influence Inquiry

Texas telecom Northpoint Technology, responding to accusations of influence peddling, says all of its affiliate agreements have expired and no undue influence has been exerted by the company.

Northpoint, which has developed a technology known as Video Distribution and Data Service (MVDDS), is seeking legislative help in overturning a Federal Communications Commission (FCC) ruling requiring the company to bid for spectrum space.

MVDDS technology, Northpoint contends, can provide television and broadband service at substantially lower prices than currently charged by direct broadcast satellites (DBS) and cable companies.

Earlier this year when two amendments designed to force the FCC to grant Northpoint a spectrum license were introduced in the U.S. Senate, critics, including Sen. John McCain (R.-AZ), began to question the relationship between the company's directors and affiliates and members of Congress.

Last week, McCain asked the company to provide a list of all individuals who hold a financial interest in the company and pointedly asked "who stands to gain" if the FCC decision is bypassed by congressional action.

McCain claims in his letter to Northpoint Chair Sophia Collier, the former treasurer of the New Hampshire Democratic party, "Recent reports indicate that Northpoint has provided financial interests in the company to several well-connected individuals, including relatives of Sen. Joseph R. Biden, Jr., former aide to President Clinton Betsey Wright, a former executive director of the Mississippi Republican party, the wife of a former aide to Senator Conrad Burns, and 'major Democratic moneymen.'"

Collier supplied the list and responded to McCain Wednesday in a lengthy letter detailing Northpoint's operations and goals.

"First and foremost, I believe that consumers will benefit from the injection of MVDDS competition in terms of substantially lower prices and improved service," Collier wrote in the letter obtained by internetnews.com "It is this very real competitive threat to the DBS industry's bottom line that motivates their opposition to the legislation."

Northpoint proposes to use the same spectrum as DirectTV and EchoStar's Dish Network but, instead of using satellites, the company wants to attach wireless transmitters to towers around the country. Since attaching transmitters on towers is considerably cheaper than building, launching and maintaining satellites, MVDDS proponents claim the technology can deliver more than 90 channels for $20 a month. They also contend it can offer broadband for another $20 per month.

Testing has concluded there would be no interference problems and last year the FCC ruled Northpoint and other MVDDS developers could share the same spectrum with satellite companies but would have to bid for the spectrum.

Northpoint protested that satellite operators were not required to bid for their spectrum space and demanded equal treatment. The FCC countered that satellite companies receive their space for free because of the enormous cost of satellite operations and the International nature of the business. The Congressional Budget Office (CBO) estimates an MVDDS auction would bring in as much as $60-$100 million.

The company then turned to Congress and Senators Kay Bailey Hutchinson (R.-TX), John Sununu (R.-NH) and Mary Landrieu (D.-LA) attached amendments to separate bills that would give Northpoint its spectrum without an auction. Both bills have passed a committee vote and await a full floor vote.

As for its influential affiliates, which included Hollywood producer David Salzman, comedienne Lily Tomlin, and former U.S. Reps. Louis Stokes and Samuel Coopersmith, Collier wrote, "It should be noted that as of March 31, 2003, all of our affiliate agreements expired because the FCC had not issued MVDDS licenses to us by that date, and new agreements have not been completed."

Collier said Northpoint's original plan was to have affiliate groups in every television Designated Market Area to "provide local know-how and to assist in the buildout and operation of local Northpoint systems throughout the country."

Collier also dealt with the financial interest of Northpoint's chief Washington lobbyist, former House Speaker Bob Livingston.

"Our agreement with the Livingston Group is illustrative of an option agreement, and with the agreement of the Livingston Group, we are providing the terms of the agreement," Collier wrote.

The lobbying group receives a monthly retainer of $10,000 and had an option that expired earlier this year to acquire an interest in the Northpoint Tampa, Fla., affiliate equal to seven percent.

"Had the Livingston Group been able to exercise that option, however, they would have been obligated to contribute a disproportionate share of the financing needed to build the system in Tampa," Collier's letter states. "In other words, if it cost $10 million to buildout the Tampa market, the Livingston Group would have had to contribute approximately $1 million of the financing under the agreement."

Collier added that every person who enters into an agreement to become a Northpoint affiliate has the same kind of obligation to provide financing.